Q. Before my wife and I married, she convinced me to sign a Prenup prepared
by her brother, who is a Los Angeles divorce attorney. It says that I
waive any right to property acquired with her earnings. It also says I
had the opportunity to get legal advice but was choosing not to. At the
time I couldn't afford an attorney. Six years later, she says I have
no rights to the house we bought together. A friend says that since I
didn't have an attorney at the time I signed it, the agreement cannot
be enforced. Is this true?

Rick, Pasadena, CA

Must an Attorney Advise Me Before I Sign a Premarital Agreement?

Whether or not a Prenup - formally known as a premarital agreement - gets
enforced is highly fact specific, so it is impossible for me to answer
your question except in general terms. I would need more information and
to look at the document carefully. I can give you some useful pointers, however.

California has adopted the UPAA (The Uniform Premarital Act) as Family
Code sections 1600-1617. Prior to its adoption prenups were viewed by
courts with suspicion, and they were much harder to enforce. One reason
was that as a matter of public policy it was believed that prenuptial
agreements undermined marriage and so promoted divorce. Today they are
viewed as supportive of the marriage institution, particularly in cases
of second marriages where many people won't remarry without one. Although
we speak in terms of marriage, the UPAA applies equally to registered
domestic partnerships.

Still, they are viewed somewhat technically and to be enforceable they
must meet the requirements of the statutes.
Family Code section 1612 speaks to what rights are properly altered by a Prenup. Subsection (a)(1)
and (3) deal with property interests. As a starting point, there is no
question but that a premarital agreement can waive interests in real property
like residences.

The critical family code section dealing with enforceability is
section 1615. Anybody considering a Prenup, or questioning its validity, should scan
this statute. The chief defense to a Prenup is that it was not executed
voluntarily. If you can prove that, it will be treated as void. If the
agreement was signed as result of duress, coercion or undue influence
it will likely not be enforced. The lack of an independent attorney can
result in a finding that the agreement was not entered voluntarily.

If one expects a premarital agreement to be enforceable, there is simply
is no safe reason for dispensing with legal counsel. Prenups should only
and always be drafted by qualified attorneys, and both parties must actually
be advised about their legal effect, or they may not be worth the paper
they are written on.

In all cases where my office drafts a premarital agreement, we will not
proceed if the other party is unrepresented. In fact, where the other party lacks sufficient financial resources to
do so, we insist that person select counsel and that our client pay for
it. In my opinion it is a dangerous practice to deny a less financially
empowered spouse or domestic partner the ability to access legal counsel
in these situations.

Why Is Independent Counsel Important?

The importance of having independent counsel in these matters is evident
from the language of FC section 1615:

"(a) A premarital agreement is not enforceable if the party against
whom enforcement is sought proves either of the following:
* * *
(c) For the purposes of subdivision (a), it shall be deemed that a premarital
agreement was not executed voluntarily unless the court finds in writing
or on the record all of the following:

(1) The party against whom enforcement is sought was represented by independent
legal counsel at the time of signing the agreement or, after being advised
to seek independent legal counsel, expressly waived, in a separate writing,
representation by independent legal counsel.

(2) The party against whom enforcement is sought had not less than seven
calendar days between the time that party was first presented with the
agreement and advised to seek independent legal counsel and the time the
agreement was signed.

(3) The party against whom enforcement is sought, if unrepresented by legal
counsel, was fully informed of the terms and basic effect of the agreement
as well as the rights and obligations he or she was giving up by signing
the agreement, and was proficient in the language in which the explanation
of the party's rights was conducted and in which the agreement was
written. The explanation of the rights and obligations relinquished shall
be memorialized in writing and delivered to the party prior to signing
the agreement. The unrepresented party shall, on or before the signing
of the premarital agreement, execute a document declaring that he or she
received the information required by this paragraph and indicating who
provided that information...."

Notice how these provisions are almost shouting 'independent legal
counsel.' It is rare to see a phrase repeated so often within the
same code section.

So examine whether your agreement, and the required separate writing,
seem to address these requirements. Also, check to see whether the other
conditions for enforceability are met. There may be other reasons why
your Prenup will not be enforced, as where undue influence was exerted
to obtain your signature (notice the seven day waiting period, which is
intended to overcome the social pressures where a wedding date is looming).
But you would be ill-advised to embark upon a challenge to the agreement
without legal counsel this time around; don't compound the problem.

A final comment: Setting aside the prenuptial agreement may only have
a limited affect upon the status of the house. For instance, the rules
relating to transmutations and reimbursements still apply. I have written
about those elsewhere in this Blog, but if the house was acquired by your
wife as her separate property independently of the Prenup it remains her
separate property even if the agreement is voided. However, if there was
a mortgage and it was paid down with her earnings during marriage the
cancellation of the Prenup may benefit you because the community will
thereby gain a Moore Marsden reimbursement right in the principal pay
down and appreciation.

Again, seek out an experienced family law attorney. And, I always urge
that people consider mediating these types of family law disputes, or
even mediating the provisions of the prenup prior to signing the final version.

Does MOORE MARSDEN appy to IMPROVEMENTS we made to our RESIDENCE during marriage?

Posted By Thurman Arnold

Q. I understand that Moore Marsden has something to do with reimbursing
the community estate for the mortgage payments we made on the house my
wife owned prior to our marriage, but we spent some the monies we saved
during our marriage on improvements to the house. Do I get any of this back?

What Is the Moore Marsden Formula?

The Moore Marsden formula typically deals with what happens to the equity
in property owned in the name of one spouse alone - in this case a house
- where during marriage community property (i.e., either spouse's
earnings) is used to make mortgage payments. Where these mortgage payments
are a combination of principal and interest, and not interest only, their
net effect is to increase equity by reducing principal. Over many years
the amount of principal reduction can be substantial. In effect the spouse
who solely owns that residence is benefiting by the community's contribution.
This is potentially a kind of breach of fiduciary duty, giving rise to
reimbursement rights. Over time this right of reimbursement to the community
grows, but it only applies to increases in equity. There is no right to
be reimbursed for interest, taxes and insurance payments. I have given
an example of
how these Moore Marsden interests are calculated here.

What About Transmutations?

Sometimes during marriage after a period of community payments on the separate
property mortgage of one spouse, spouses or domestic partners transfer
title to the property into joint names (often where there is a refinance
and the lender requires it) so that now both spouses are on title to what
was previously one spouse's separate property. This is called a transmutation. Under
Family Code section 2581 the property is deemed "acquired" during marriage and so the
house now presumptively becomes community property. Use our search engine
to find more information about transmutations. Later, upon dissolution
or legal separation these interests need to be separated out and accounted
for. In such cases several levels must be analyzed:

First, a transmutation (adding a spouse to title to what was previously
separate property) must be free and voluntary, and there is a presumption
that the spouse who comes onto title did so through some form of undue
influence. This may or may not at all be true, but it is the burden of
the later titled spouse to establish the absence of undue influence. If
there was undue influence, then the title change can be set aside and
the property remains separate. If the title change is set aside, Moore
Marsden applies because the property will be deemed to have always been
the separate property of the first spouse but the community will still
be entitled to a ratio of equity reimbursements.

If there has been a valid transmutation, then the first spouse is still
entitled to be reimbursed for the value of their separate property contribution
to the community (absent an express written waiver of this right of reimbursement).
This is determined as of the date of the transmutation, and is governed by
Family Code section 2640. Moore Marsden may still apply to determining the amount of this 2640 reimbursement.
For example, say on the date of marriage Wife owned the property in her
name and the mortgage owing is $100,000. Assume at the date Husband is
added to title the mortgage has been paid down to $80,000. Also assume
the value of the property remains the same at $200,000. Here there has
been an increase of $20,000 in equity and the community must be reimbursed.
On the date Husband goes on title $100,000 of the equity is Wife's
pure separate property - the house was worth $200,000 and the mortgage
was then $100,000. Wife is entitled to a 2640 reimbursement of $100,000.
However, both H and W have a community interest in that $20,000 of principal
reduction. Moore Marsden will be used to determine the value of each of
their shares (often there has been a change of value between the two dates
- assuming the house appreciated, then they also share in different proportions
in the equity increase). Wife's $100,000 2640 reimbursement will be
increased by her share of the community increase. If there has been appreciation,
a ratio is determined that fixes the amount of community reimbursement due.

Only Calculate the Moore Marsden Claim Up to Point of Transmutation

In contrast, if the mortgage had been interest-only up to the date of the
transfer (with no capital improvements), then as of the date of this transfer
the community would have no Moore Marsden reimbursement and Wife's
2640 claim would be 100% of the home equity on that date.

Once both parties jointly own the property, Moore Marsden will not apply
to the increases or contributions that occur thereafter (unless there
is a future transmutation back to one party or the other alone) although
it may later be used as illustrated above to determine 2640 credits on
the date the other spouse goes on the deed. This is because the formula
is only used to value reimbursements to the community for mortgage debt
payment - once parties are on title, the residence becomes community property
subject to a separate property reimbursement instead of separate property
subject to a community reimbursement. It still apples to determining the
other party's 2640 reimbursement at the time of transmutation.

Moore Marsden and Residence Improvements

A common situation occurs when one spouse holds property in their name
alone but the spouses together, or the other spouse, contributes monies
to remodels or improvements. If the source of the improvements are the
community dime, rather than the owner's SP, the value of those improvements
may need to be reimbursed.

However, they are not reimbursed as part of a Moore-Marsden calculation. Moore Marsden reimbursements are limited to issues relating to reduction
of debt on real property (mortgages), but also include a share of appreciation,
as part of the "acquisition" of that property. Capital improvements
are not considered an "acquisition."

Instead, a separate line of cases empowers courts to reimburse the community
estate (of which each party owns one-half) for at least the dollar-for-dollar
value of the contributions (i.e., installing an irrigation ditch:
Marriage of Wolf (2001) 91 Cal.App.4th 962), but possibly for the enhanced value to the
property that the improvements create, if that sum is greater than the
out of pocket costs (Marriage of Frick (1986) 181 Cal.App.3d 997). Thus, the extent of the reimbursement may
turn on whether those improvements actually increased the value of the
home. If community funds are used to buy a solid gold toilet, that toilet
may have little impact on the value of the home per se (the toilet is
still worth whatever it is worth). Many improvements (or repairs) don't
increase value. Another example might be an improvement that loses value
over time, like new carpeting. This is to be compared with adding more
square footage by enlarging the house. Expert testimony may be required
to prove the improvements increased value and to what extent.

What happens when one spouse's SP is used to make some form of payment
on the other spouse's SP, whether for mortgage reduction or improvements?
It may well be treated as a gift.
Marriage of Camire (1980) 105 Cal.App.3d 859.

And, what happens where the CP improvements for which a reimbursement right
does exists were made prior to a transmutation, i.e., before the other
spouse comes to be added to title? In those situations, the party who
owned the separate property is entitled to a
Family Code section 2640 credit for their equity in the property on the date the other becomes
a joint owner. That will require a Moore Marsden calculation as of the
transmutation date, but it won't take the CP improvements into account.
Whether these get reimbursed at all would seem to depend on whether the
property has continued to increase in value after becoming joint. It will
be within that increase that the prior-to-transmutation improvements get
reimbursed. If there is no increase, or even a decrease, then the community
ultimately made a bad investment. Remember, these types of reimbursements
only come from the asset itself, and not from some other unrelated property or asset.

Complicated? You bet. There are so many possible scenarios and it is hard
to speak to these concepts except in generalities. Often a forensic accountant
with Moore Marsden experience will need to be engaged. Since the fair
market value of property may need to be determined at various points of
time (for instance, the date of marriage, the date the new spouse comes
on title, and the date of division), expert opinions of value of the real
estate may also be required. It may be problematic to value property as
of some long ago date.

My hope is here is to introduce you to the concepts so that you may be
somewhat conversant with them. Find an experienced family lawyer to assist
you! They will know local experts who can help with the analysis.

Q. Can I file for legal separation in California if I just moved here from Arizona?

In order to be entitled to file an action for legal separation, a spouse
does not need to be a resident of the State of California when they file;
this is not true for divorce. To be legally entitled to file a dissolution
proceeding here, you must either already be a California resident temporarily
living elsewhere, or you must have been physically present in this state
for at least six months.

For example, assuming Mrs. Smith from Idaho moved to California two months
ago and now wishes to dissolve the marriage in this State, she has not
yet met the California residency requirements for divorce and if she files
an action for dissolution it will be denied - especially if Mr. Smith
objects that she is not a resident of this State. But perhaps Mrs. Smith
is in immediate need of spousal support - she is fleeing domestic violence
by Mr. Smith who is a raging alcoholic - in that case, even though she
is not domiciled here and has not been here for at least six months, she
can file an action for legal separation and obtain temporary support orders
and possibly attorney fees against Mr. Smith, so long as there is a basis
for California to assume jurisdiction over Mr. Smith once he is served.

After the time has passed (6 months) for Mrs. Smith to establish her residency
here, she is entitled to amend to the Petition to now seek a divorce.
In the meantime, she has been protected. (While a California Court can
always dissolve a marriage, in order for property or financial orders
to be valid as against Mr. Smith, California must have jurisdiction over
him by way of his presence here at least at time of service, his consent
to jurisdiction, or other legally sufficient contacts with this state).

Please note, however, that Legal Separations can only be granted by mutual
consent, or where the other party fails to respond in the action and so
the Judgment is entered by default. Also, divorces filed in other states
trump legal separations filed in California for purposes of forcing you
back there to litigate if you spouse wishes to go that route.

My wife she used her INHERITANCE to buy our home. We are getting divorced.

Posted By Thurman Arnold, III

Q. My wife and I separated in June 2009. When we purchased our home in
March of 1998 (married December 1994), she used part of an inheritance
from her grandmother to help with the down payment. I have been paying
the mortgage since we bought it. Will she get her inheritance back in
our divorce? What would I get?

Howard, Seal Beach, CA

Because I need more information and the answer to some questions and then
to follow up questions, I can only give you a generalized response.

Family Code Section 2640

So long as your wife can trace the portion of her downpayment contribution
to the inheritance, she is entitled to a
Family Code section 2640 reimbursement in the amount that she proves by this tracing. However, she has the burden
of proof and problems arise for her if the monies were commingled into
a joint account. Does she have the necessary records? If this is a lengthy
marriage, I'd bet not.

She is not entitled to interest on grandma's gift to her, however,
but only the principal. However, this assumes that the downpayment contribution
always remained separate from any other money or bank assets that you
had an interest in, or that the community had an interest in: If the inheritance
monies were commingled with joint monies or your separate funds between
the date she received them and the date they were used as part of the
purchase price for the home, then a further tracing is required to establish
that what money in the account at that time was her separate and what
amount was something else.
Here is a Blog article that discusses tracing principles in more detail.

You don't report whether you were on title to the residence when escrow
closed or at any later time. Whether or not you were on title when the
property was purchased, it is presumed to be community property UNLESS
you (a) deeded off when escrow closed or deeded off since that time or
(b) consented to or are deemed to have consented to your Wife being the
sole record title holder if at the close of escrow title issued in her name.

If you were on title at close of escrow and to the present day, the answer
is easy - your Wife gets her traced inheritance money first, off the top,
from any equity in the home. She does not get interest on the money. The
remaining net equity, without other facts, belongs to the community so
that each of you is entitled to one-half of what remains.

If you were not on title when escrow closed, and if you cannot rebut by
clear and convincing evidence the legal presumption set forth in
Evidence Code section 662 (based upon form of taking title in her name alone) that you consented
to that outcome, then (a) your Wife still gets her downpayment back and
(b) the community estate is entitled to be reimbursed for carrying the
mortgage all those years and reducing the principal balance due the mortgage
holder. It doesn't matter who paid the mortgage, so long as it was
paid from community earnings during the marriage.

Moore-Marsden Apportionments

There is a very important reimbursement concept under California Law known as
Moore-Marsden apportionment. It applies to a common situation where a home is acquired before marriage
(or during marriage as separate property), title is in the name of the
acquiring spouse alone, and during the marriage and up to separation or
divorce and there is or was a mortgage that was paid during the marriage.

Where this occurs the community estate acquires a legal, reimbursable,
interest in what would be otherwise be entirely the separate property
of the titled spouse IF community funds (earnings of either spouse, for
instance, or both) are used to make the mortgage payments. The idea is
that joint funds are being used to benefit a separate property interest,
i.e., the separate property equity. Many legal scholars consider this
to be a breach of fiduciary duty - that whenever one or the other spouse's
separate property interests are increased with community funds, or community
time, skill, and efforts of either spouse during the marriage, the community
is disadvantaged and that this disadvantage violates the statutory duties
of the parties that place the party's joint interests above their
separate interests.

The formula for apportionment is that the community acquires a pro tanto
(dollar for dollar) interest in the ratio that principal payments on the
purchase price made with community property bear to payments made with
separate property. Hence, any increase in value (appreciation) must be
apportioned accordingly between the separate property and the community
property estates upon separation or dissolution.

Note that this only applies to separate property owned prior to marriage
with a mortgage that was paid during marriage where an equity position
has been increased. For instance, if a mortgage exists but it is an interest
only, payments during marriage do not reduce principal. Therefore, the
separate interest of the owner spouse is not improved because the debt
remains exactly the same. As a general rule, the amounts paid for interest,
taxes, and insurance on the house are disregarded since that portion does
not to contribute to the capital investment.

Also, it assumes that the mortgage was paid with joint (community) funds,
or that the funds used were so commingled that the "separatizer"
is unable to trace them to a separate property source (meaning they don't
have records showing where each payment was made or are unable to provide
a recapitalization of the source of the funds). If your husband reduced
the mortgage throughout the marriage but he did it with an account that
was his separate property then the community would not have this reimbursement right.

The Moore Marsden formula requires a number of bits of information at
important points in time to be properly calculated. These include: a)
what was the original purchase price; b) what was the original mortgage
and downpayment; c) what was the property worth at the date of marriage
(DOM); d) what was owed to the lender at that time; e) what was the property
worth at the date of separation; f) what was owed at that time; g) what
is the property worth on the date of the calculation (i.e., the trial
date); h) and what is the principal pay-off at that time?

This is a good example of why family law and divorce cases can become
quite expensive. Obtaining these records, particularly if you are the
'out spouse' can be difficult, and sometimes a forensic accountant
is the best option for calculating these apportionments. Find a local
CPA with family law experience to help you trace the funds. You need an
experienced family law attorney for these types of matters as well.

Can you give me a MOORE MARSDEN Analysis on My SEPARATE PROPERTY HOME?

Posted By Thurman Arnold

Q. Can you please help. I understand a Moore-Marsden analysis needs to
be performed on my house in my pending divorce, but I don't understand
what it is my attorney is telling me.

These are the facts. On 1/1/02 I put my wife on the title to the property.
This is what happened.

Purchase price 6/92 before marriage

$164,875

Date of Marriage 5/15/94 Market value

$190,000

Market Value 1/1/2002 when Wife goes on Title

$245,000

Market value 4/7/2008

$612,000

Initial 6/92 Down payment

$54,875

Principal Payment from separate prop. after separation

$6,836

FMV today (decreased since DOS)

$500,000

Frederic, in San Dimas

Sample Moore Marsden Analysis

Here is an illustration of how the calculation works. You are attempting
to determine two things: a) the amount of principal reduction on the real
estate during marriage, and assuming the property is titled in only one
spouse's name (or as of the date of transmutation, where both spouses
go on title down the road, if applicable); and b) the percentage share
by the community in the appreciation, if any, during the period in question.

Please see my
FAQ on Moore Marsden generally. As you can see, it is complicated. You will need a forensic
accountant and you may want a real estate expert because fair market values
need to be fixed at various dates. Your situation is even more complicated
because you placed her on title. The simplest Moore-Marsden ("M-M")
situation deals with a property owned in the name of one spouse throughout
the marriage, where marital earnings are used to pay the mortgage down
- the fundamental concept is that the community should get some reimbursement
for this, which comes back as a share in the appreciation and reduced
principal obligation.

You will need to get:

the mortgage payoff balances on the date of marriage;

the mortgage payoff balance on date of the transmutation (when your wife
went on title)

the payoff balance at date of separation

and you will need a mortgage balance near the date of your trial

I want to mention that all transmutations that favor one spouse and disadvantage
the other, like putting her on the deed on 1/1/02, are subject to a claim
that they should be set aside. This is because there is a presumption
that your Wife exerted undue influence upon you - please research my fiduciary
duty blog articles using the on-site search engine if this interests you.

The information on this website is for general information purposes only.
Nothing on this site should be taken as legal advice for any individual
case or situation. This information on this website is not intended to
create, and receipt or viewing of this information does not constitute,
an attorney-client relationship.